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Stop fearing the future and start driving it!There is an old adage that ‘fortune favors the brave’ and never more so than at present, when, despite the temptation to regress, strategic investment in IT and ecommerce projects may help businesses weather the storm and emerge stronger, leaner and ahead of their competitors. |
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But this recession looks set to be both severe and long lasting, so is the right policy really to lock down the status quo, especially if it involves inflexibility, compromise and expense, leaving firms ill positioned to shed cost and respond to new challenges?
I believe that such prudence will prove in time to be the higher risk option. Instead, businesses should focus on change processes and commercial agreements with suppliers that will deliver rapid benefits in the form of reduced operational costs and increased flexibilities – both vital to steering a lower risk, more positive course through the next 24 months.
The relatively good news is that, unlike the last crash, in 2001, which brought the dot com boom to a sudden and painful halt, it looks as if business leaders are giving themselves time to think and plan this time around. Furthermore, the general view is that companies are better prepared to handle IT ‘adjustments’ in a controlled and objective manner, having adopted a more measured approach to spending as things have recovered during the last four years.
It should also be noted that in 2001, if one was asked how far the daily operations were dependent on IT systems the likelihood is that an answer of “very” would be delivered only after considerable thought. Today all levels of management understand just how difficult, if not impossible, everyday business life becomes when IT systems are not operating effectively. To a degree this intimate dependence of routine business functions on IT service delivery should help ensure that IT does not bear a disproportionate burden when it comes to any budget cuts. In the multi channel age, IT is the foundation of sustainability and the development of new, better technologies will not be put on hold, recession or no recession.
To put things into context, consider the rapid advances that we have made in IT since the turn of the decade – IP based telephony, TV on demand, generally reliable business and desktop applications! All this advance based on a self fulfilling prophecy known as Moore’s Law that states the capability of computer hardware doubles exponentially every 24 months. Sounds very dry, but think of what Moore’s Law has enabled your business to achieve and what practical application of new technology has then delivered. A lot of process efficiency and competitive advantage gained. Halting this momentum may be terminal in the medium/long term.
The foundations of IT strategy, both demand (user/client) side and supply side, have been totally eroded and radically reshaped by the very same impact of Moore’s Law since the Millennium. This is why I judge that the better, lower risk and more cash conserving course is to get serious and prepare to make IT decisions that the economic conditions won’t knock off course, based on four key themes:
The first is the ‘commoditisation’ of converged and integrated data processing, storage and networking as services. The pennant bearers such as Google and Amazon made the leap of faith years ago, but Microsoft and IBM’s growing investment in a network of ‘cloud computing’ facilities says that the major IT influencers have now got the message. This new reality offers access to highly scalable on demand capacity with transparent transactional costs, great flexibility for change, and, potentially, the end of capitalised IT.
Gartner highlighted the need to start taking cloud computing seriously, commenting: “Cloud computing uptake offers the prospect of a completely new way of provisioning IT so it might pay to work on understanding it now, especially as cost saving is a key promise of the model.”
The second concept is the impact of software as a service or ‘SaaS’ which is rapidly reshaping the software supply chain. This is about software companies converting retailers and online businesses into new and leaner enterprises that have a high technology: people ratio, solely focused on high value and revenue generating activity.
“In the SaaS world you are encouraged to think of your business system or webstore platform as an operating expense to be paid knowingly like gas, electricity or rates.”
Established and traditional software developers resist the move to SaaS for obvious reasons: they are hooked on capital license revenue. SaaS pioneers like Netsuite and Salesforce.com, free of such vested interests, are more willing to break the mould. Whilst these large scale suppliers have certainly struggled to crack niche areas, more fleet of foot SaaS providers have successfully serviced the mail order and eCommerce market for a number of years. The sharp lowering of costs and risk that the SaaS proposition delivers is simply too persuasive a case to ignore.
The third theme lies more directly in the hands of the ‘techies’. Service Oriented Architecture (SOA) now provides the means to resolve the intractable problem of compromised and tightly integrated legacy systems. Modern business and ecommerce applications have been built with open systems/SOA architectures at their core. This enables incremental change rather than ‘big bang’ – fast and simple projects that cut the restraints of tightly coupled legacy, delivering fast returns. If your reporting system, forecasting module or website search is poor, replace them! …but without
the need to replace the whole enterprise system. The new world of loosely coupled applications provides a wonderful opportunity to deliver user specific software and respond to the challenges now faced.
On a final note, the availability of capital in today’s financial markets is likely to throw some attention onto alternate sources of IT financing. Despite the malaise, the financing arms of larger IT suppliers are generally in good shape. Dell, HP and Microsoft amongst others are in a position to help creditworthy customers in a variety of ways. It is therefore worth approaching these, and possibly newer players to explore the financing options that may be available. Sources of dedicated IT financing can provide traditional offerings such as leasing but can also offer full project financing, potentially covering all of the hardware, systems software, applications and services necessary to deliver a new solution.
These four themes promise to frame your IT strategy with a modus operandi relevant to the age, with a common emphasis on lower costs and increased flexibility. A lower risk option than battening down the hatches, surely?
Exact Abacus
